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You are required to study the following article extracts and answer the problems given below:

Excerpt 1: The role of FDI in  the development of Singapore

Gary Dean, April 2000

Reference: http://okusi.net/garydeanlworks/fdising.html

Along with the other NIEs, Singapore shared certain factors that tended to increase its international competitiveness, among them stable macroeconomic policies, sound financial systems and good infrastructure, an educated workforce, a work ethos, and policies which encouraged entrepreneurial activity. However, in the area of foreign investment Singapore took quite another path compared to South Korea and Taiwan. In fact; the Singapore government's treatment of foreign investors -- at least in the early years of development -- was almost preferential when compared to indigenous capital. Through infrastructural subsidies and tax incentives to foreign exports, the local Singaporean business class was to an extent marginalized·

By way of contrast, South Korea's foreign investment code was one of the world's most restrictive. Unlike Singapore, South Korea had a large population and a relatively large domestic economy. South Korea's subsidised conglomerates used their highly-protected domestic markets as a base to produce the economies of scale required to launch themselves aggressively into foreign markets in the late 1960's and 1970's.

In effect, the Singaporean government's policies hoped to attract TNCs to establish manufacturing facilities in Singapore to not only provide employment, but also with the hope that sophisticated foreign technology would 'trickle down' to local companies effecting technology transfer. Government policy-makers tended to believe that TNCs were better vehicles for the acquisition of high technology.IQ] However, to what extent this trickle-down effect actually happened is debatable. It is suggested that TNCs are generally reluctant to use local contractors, which is where transmission of techniques and practices would be expected to take place, and that the technology actually used in locations such as Singapore is not cutting edge, but rather at the end of its product life-cyc1e.

Excerpt from: Foreign Direct Investment

(Source: UNCTAD)

Global foreign direct investment (FDI) inflows grew in 2007 to an estimated US$1.5 trillion, surpassing the previous record set in the year 2000. FDI flows to developed countries in 2007 grew for the fourth consecutive year, reaching US$l trillion. Flows were particularly buoyant in the United Kingdom, France, and the Netherlands. The United States maintained its position as the largest single FDI recipient. The European Union (EU) as a whole continued to be the largest host region, attracting almost 40% of total FDI inflows in 2007. However, several risks to the world economy -- most of them not new -- may have implications for FDI flows to and from developed countries in 2008.

• In Africa, FDI inflows in 2007 remained relatively strong. The unprecedented level of inflows (US$36 billion) was supported by a continuing boom in global commodity markets.

• FDI inflows to Latin America and the Caribbean, meanwhile, rose by 50% to a record level ofUS$126 billion. Significant increases were recorded in the region's major economies, especially Brazil, Chile and Mexico, where inflows doubled.

• FDI inflows to South, East and South-East Asia, and Oceania maintained their upward trend in 2007, reaching a new high ofUS$224 billion, an increase of 12% over 2006. More than half  of all FDI to developing countries went to these economies. At the subregional level, there was a further shift towards South and South-East Asia, although China and Hong Kong (China) remained the two largest recipients in the region.

• In West Asia, overall FDI inflows declined by 12%. Turkey and oil-rich Gulf States centinued to attract the most, but geopolitical uncertainty in parts of the region affected FDI overall.

• FDI to South-East Europe and the CIS, or transition economies, expanded significantly, by 41 %, to a new record of US$98 billion. This was the seventh year of uninterrupted growth ofFDI in the region. Inflows almost doubled to the region's largest recipient, the Russian Federation.

problems:

Q1) What are the determinants of foreign direct investments in developing countries?

Q2) Examine the type of incentives that developing countries governments may implement to attract foreign direct investments.

Q3) What are the FDI trends in Singapore in the last decade? Discuss any changes in the government's strategy towards FDI

International Economics, Economics

  • Category:- International Economics
  • Reference No.:- M91953

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